Section B - Case 3: GlobalCare

GlobalCare is an international NGO focused on providing clean drinking water in developing nations.

Because GlobalCare does not have a profit motive, it relies heavily on non-financial performance indicators (NFPIs).

Which TWO of the following are valid reasons why NFPIs are particularly important for an NGO like GlobalCare?

Answer options:

Financial metrics do not capture the quality or social impact of the service provided.

NFPIs are legally required by international accounting standards for all NGOs.

They align better with the organization's core mission and long-term objectives.

NFPIs are easier to manipulate than financial indicators, allowing for better PR.

How to approach this question

Consider the limitations of financial data (like a surplus/deficit) in measuring the success of a charity.

Full Answer

For NGOs, financial metrics like surplus or deficit do not indicate success. A large surplus might just mean they failed to spend their donations on their cause. Therefore, NFPIs are crucial because they measure the actual social impact (quality of service) and align directly with the organization's non-financial mission (e.g., reducing disease).

Common mistakes

Assuming NFPIs are a strict legal requirement under IFRS.

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